Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the ATRenew Inc. Third Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. We will be hosting a question and answer session after management's prepared remarks. Please note today's call is being recorded. I would now like to turn the conference over to your first speaker today, Mr. Jeremy Ji, head of corporate development. Please go ahead, sir.

Thank you. Hello, everyone, and welcome to ATRenew Inc.'s Third Quarter 2025 Earnings Conference Call. Speaking first today is Kerry Chen, our Founder, Chairman, and CEO, and he will be followed by Rex Chen, our CFO. After that, we will open the call to questions from the analysts. The third quarter 2025 financial results were released earlier today. Earnings press release and investor slides accompanying this call are now available at our IR website ir.atrenew.com. There will also be a transcript following this call for your convenience. For today's agenda, Kerry will share his thoughts on our quarterly performance and business strategy, followed by Rex, who will address the financial highlights. Both Kerry and Rex will participate during the Q&A session. Please note our Safe Harbor statements. Some of the information you will hear during our discussions today will consist of forward-looking statements. And I refer you to our Safe Harbor statements in the earnings press release. Forward-looking statements that management makes on this call are based on assumptions as of today, and ATRenew Inc. does not take any obligations to update our assumptions on these statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings press release, which contains a reconciliation of non-GAAP measures to GAAP measures. Finally, please note that unless otherwise stated, all figures I mention during this conference call are in RMB, and all comparisons are on a year-over-year basis. I would now like to turn the call over to Kerry for business and strategy updates.

Hello, everyone, and thank you for joining ATRenew Inc.'s Third Quarter 2025 Earnings Conference Call. We are pleased to update you on our strengthened operating results, share the progress of our three-stage development strategy, and address key topics of interest. In the third quarter, we once again achieved new breakthroughs across multiple operational measures. Total net revenue reached a new record high of RMB5.15 billion, representing 27.1% year-over-year growth. Our 1P product revenue sustained strong growth momentum, rising 28.7% year-over-year to RMB4.73 billion, while 3P platform service revenue increased 11.6% year-over-year to RMB420 million, demonstrating continued healthy growth. Non-GAAP operating profit reached a record high of RMB140 million, up 34.9% year-over-year, with our non-GAAP operating profit margin achieving 2.7%, demonstrating steady improvement both year-over-year and quarter-over-quarter. During each third quarter, we strategically prepare for the mid to late September launch of flagship devices from leading manufacturers while building operational capacity to support uptake in new device shipments throughout October, providing users with better reflecting and trade-in experiences. Looking closer to our third quarter performance, within our 1P business, we have successfully expanded our product acquisition through trading programs and our AHS Recycle brand. We have effectively leveraged our proprietary combined refurbishment capabilities to deliver premium curated products to consumers through retail channels, including AHS Selection and Pipai. This strategy delivered impressive results, with compliant refurbished product revenue surging 102% year-over-year in the third quarter. 1P2C revenue sustained robust growth of over 70% year-over-year, and the 1P2C proportion expanded to 36.4%. We believe that strengthening our retail capabilities will enhance our pricing power in the recycling end and effectively strengthen end-to-end value throughout the industry's supply chain. On the supply side, we focused on building stronger customer awareness and recognition from the AHS Recycle brand. Orders through the AHS official website…

First, in B2B, PJT Marketplace continues to provide an inclusive trading environment for small and medium-sized merchants. By the end of the quarter, the number of contracted merchants on the platform quickly surpassed 1,370,000. This was driven by two factors. On one hand, the number of sellers representing product supplies continued to grow rapidly, thanks to PJT Marketplace's strong infrastructure and merchant service capabilities. On the other hand, with the rapid onboarding of small-sized merchants, such as those leveraging the specialty buyer model of the win, accelerated supply chain enhancement for these merchants. To ensure a positive buyer experience during this expansion, we temporarily allowed more flexible post-sale rights and made a strategic adjustment to PJT Marketplace's take rate. We remain confident in PJT Marketplace's long-term monetization potential, not only because of its maturing trading infrastructure but also because of its flexibility to innovate, expand user reach, optimize services, and create more value over time. Second, in B2C, Pipai's user service and monetization capabilities achieved another year-over-year improvement. While maintaining POP open platform functionality further strengthened consignment services for small and mid-sized merchants. Under this model, merchants no longer need to worry about product management, store operations, traffic, or after-sales as Pipai provides standardized end-to-end operational solutions. In the third quarter, GMV for consignment grew 180% year-over-year, and the take rate continued to trend upward in the high single-digit range, reflecting strong merchant recognition of our service value. Third, our asset-light platform for multi-cash flow recycling services sustained rapid growth, with transaction volume increasing by 95% year-over-year, and user experience continues to improve. As of September, 878 self-operated stores and 131 franchisee locations had activated multi-category capabilities, expanding geographic coverage. Newly enabled stores typically stabilize performance within two to three months after allocating front-end and fulfillment costs. Multi-category services deliver an average monthly contribution profit of RMB7,000 per store, optimizing the unit economics of AHS stores. This model supports customer acquisition, repeated orders, and the disciplined rollout of additional high-quality stores. We continue our strategic adoption of automation and AI technologies to drive excellence in operation and experience. As our business scales, automated inspection systems at both the recycling and operational centers generate significant economies of scale and help optimize our fulfillment expense ratio. Beyond the AI-powered automation inspection capabilities for recycling of secondhand luxury goods discussed last quarter, we have also deployed AI applications in customer service inquiry handling and training. These initiatives are enhancing the user experience and building robust capacity to handle peak demand areas, such as major promotional events. That concludes our review of third-quarter operating results. Next, I would like to take this opportunity to continue sharing our three-stage development strategy for the next two to three years.

The first stage is to continue translating the core capabilities of the second-hand consumer electronics. ATRenew Inc. has already become China's largest platform for second-hand consumer electronics transactions and services. We have interpreted the entire industry chain across C2B, B2B, and B2C, industry-leading end-to-end capabilities, and maximizing value for both users and the industry. Going forward, we will reinforce this foundation in four ways. First, by enhancing scenario capabilities and deepening trade-in collaboration in new device sales channels with partners such as JD.com and Apple, enabling low-cost, high-efficiency access to firsthand supply. Second, by strengthening fulfillment capabilities through our nationwide AHS store network and through our service teams to ensure a superior user experience. Third, by enhancing the capabilities of retail sales, combined refurbishment, and a high proportion of retail sales, to achieve an end-to-end loop and improve supply chain value. And fourth, by advancing technology capabilities, leveraging automation and AI technology, to unlock scale efficiencies over the long term. The second stage is to accelerate the growth of AHS Recycle as China's leading recycling brand. By combining our in-store-based fulfillment capabilities with an asset-light platform model for multi-category recycling, we aim to increase user engagement and frequency of service usage. At the same time, the ecosystem extension of AHS Recycle is expanding into extensive community scenarios across major cities. The AHS Recycle brand will partner with more consumer brands to promote REVIVE initiatives based on high-frequency scenarios, using brand incentives to encourage broader participation in recycling and the circular economy across China, so that everyone can benefit from the sustainable consumption model we advocate. With this, we strengthen consumer awareness of our recycling capabilities, improve our active user base of consumer electronics with high-frequency daily grain disposal activities, and promote a closed loop of grain recycling and grain consumption.…

Hello everyone. We are pleased to report outstanding financial performance in 2025. We continue to capture opportunities from targeted trading scenarios, enhanced fulfillment and supply chain capabilities, and elevated AHS Recycle brand presence. Total revenue in the third quarter was at the high end of our guidance, increasing by 27.1% to RMB5.15 billion. Adjusted operating income grew by 34.9% to over RMB140 million. Before taking a detailed look at the financials, please note that all amounts are in RMB, and all comparisons are on a year-over-year basis unless otherwise stated. In the third quarter, total revenue growth was primarily driven by continued net product revenue growth. Net product revenues increased by 28.7% to RMB4.73 billion, largely attributable to the growth in online sales of pre-owned consumer electronics. Net service revenues were RMB420 million in the third quarter, representing an increase of 11.6%. The increase was largely driven by Pipai Marketplace and multi-category recycling business. The overall take rate of our marketplace was 4.89% for 2025. During the quarter, our multi-category recycling businesses contributed nearly RMB53 million of revenue, accounting for 12.5% of service revenue. Now let's discuss our operating expenses. To provide greater clarity on the trends in our actual operating-based expenses, we will mainly discuss our non-GAAP operating expenses, which better reflect how management views our operating results. The reconciliations of GAAP and non-GAAP results are available in our earnings release and the corresponding Form 6-Ks furnished with the U.S. SEC. Merchandise costs increased by 26.3% to RMB4.1 billion, in line with the growth in product sales. Gross profit margin for our 1P business was 13.4% compared with 11.7% in the same period last year. The gross margin improvement in our 1P business was primarily driven by high-efficiency C2B recycling scenarios, compliant refurbishment capabilities incorporated in our supply chain, and an increasingly diversified retail channel mix. This allowed us to increase the proportion of higher-margin retail sales. 1P2C revenue accounted for 36.4% of product revenue in 2025, up from 26.4% in the same period last year. Meanwhile, our international business operation efficiency has improved with continued improvement in both scale and gross margin. Fulfillment expenses increased by 25.9% to RMB440 million. Non-GAAP fulfillment expenses increased by 25.6% to RMB430 million. Under the non-GAAP measures, the increase was mainly driven by higher personnel and logistics expenses, reflecting a greater volume of recycling and transaction activities compared to the same period last year in 2024. Additionally, operation-related costs rose as we expanded our store network and enhanced operation center capacity in 2025. Non-GAAP fulfillment expenses as a percentage of total revenues decreased to 8.4% from 8.5%.

Selling and marketing expenses increased by 15.4% to RMB360 million. Non-GAAP selling and marketing expenses increased by 40.6% to RMB360 million. The increase was primarily driven by higher advertising and promotional campaign-related spending, as well as an increase in commission expenses associated with channel service fees. As a result, non-GAAP selling and marketing expenses as a percentage of total revenues increased to 7% from 6.3%. General and administrative expenses increased by 6.9% to RMB74.1 million. Non-GAAP G&A expenses also increased by 17.7% to RMB5.2 million, primarily due to an increase in tax and surcharges, as well as an increase in consultant fees. Non-GAAP G&A expenses as a percentage of total revenues decreased to 1.3% from 1.4%. Technology and content expenses increased by 19.5% to RMB61.1 million. Non-GAAP technology and content expenses increased by 23.2% to RMB61.1 million as well. The increase was primarily driven by elevated personnel expenses. Non-GAAP technology and content expenses as a percentage of total revenue remained stable at 1.2%. As a result, our non-GAAP operating income was over RMB140 million in 2025 compared to non-GAAP operating income of RMB100 million in 2024. Non-GAAP operating profit margin was 2.7% for this quarter, compared to 2.6% in 2024, representing an increase of 16 basis points. During 2025, we repurchased a total of 4.5 million ADSs for approximately USD2.1 million. We will continue to evaluate our overall profitability and update the shareholder return programs at the appropriate time. As of September 30, 2025, cash and cash equivalents, restricted cash, short-term investments, and funds receivable from third-party payment service providers totaled RMB2.54 billion. Our financial reserves are sufficient to support reinvestment in business development and shareholder returns. Now turning to the business outlook. For 2025, we anticipate total revenues to be between RMB6 billion and RMB6.18 billion, representing a year-over-year increase of 25.4% to 27.4%. For the full year 2025, we estimate total revenues to be between RMB20.87 billion and RMB20.97 billion, representing a year-over-year increase of 27.8% to 28.5%. Please note that this forecast only reflects our current and preliminary views on the market and operational conditions, which are subject to change. This concludes our prepared remarks. Operator, we are now ready to take questions.

Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. When asking a question, state your question in Chinese first. Then repeat your question in English for the convenience of everyone on the call. And the first question will come from Wan Jiao with CICC. Please go ahead.

Thanks for taking my questions. My first question is we know that recently we are having some changes to the national subsidy policies. Could you please share the impact on your business? And the second one is, could you please give us more color about the outlook for Q4 and next year? Thank you.

Thank you for your question. The first question is about national subsidy. That is a very good question. Let me address it by analyzing the growth drivers of our 1P business in the context of the national subsidy. The national trade-in subsidy directly promotes the sales of new devices. However, these subsidies are only applicable to new devices priced under RMB6,000. Therefore, a significant portion of consumers purchasing premium models do not utilize these subsidies. Given that our 1P business primarily focuses on premium brands, the proportion of trading orders utilizing national trade subsidies was actually quite limited this year. Nevertheless, the national subsidies have effectively stimulated upgrades within the pre-owned consumer electronics industry. Benefiting from our mature trade-in supply chain this year, we collaborated with JD.com to create the best-in-class trading user experience. We also worked with brands like Apple, Huawei, and Xiaomi, facilitating device upgrades for more users through trade-in offsets. This approach, combined with specific subsidies offered by e-commerce platforms and manufacturers in trading scenarios, helps users upgrade their devices at a lower cost. We estimate that AHS Recycle achieved a trade-in penetration rate exceeding 10% on JD.com this year. The penetration rate is consistently increasing, driving precise conversions within JD's core human electronics business. Furthermore, we see significant potential for further growth in this penetration rate. As the retail prices of new devices from brand manufacturers continue to trend upwards, trading programs are gaining favor among users as a more cost-effective upgrade path. Simultaneously, these programs help manufacturers protect the retail pricing of their new devices, creating a win-win situation. The scenario of new device retail presents an important source for us. We will continue to collaborate closely with our e-commerce and manufacturing partners to optimize the trading pricing algorithm, operational processes, supply chain, and user…

The next question will come from Wei Fadi with DBS. Please go ahead.

I will recap in English. So good evening management and congratulations for the astonishing third-quarter results. So two questions from our side. The first one is what is the store opening pace for the fourth quarter and for the year for ATRenew Inc.? Thank you.

I will take the first question. For the full year 2025, we maintained our target of accelerating store openings. As shown in our store structure and capabilities, the number of self-operated AHS Recycle stores in Tier one and Tier two cities has grown steadily. For self-operated stores, we prioritize quality development, focusing on delivering a superior user experience through enhanced fulfillment capabilities. Nearly 88% of these self-operated stores are now equipped with multi-factor services. Regarding joint-operated standard stores, to build capabilities together, we actively collaborate with local market partners. Based on empowering them with our capabilities and traffic support, we work with city partners to serve local users and rapidly advance our store opening goals. In some franchised store scenarios, we are prudently exploring service capabilities for high-value categories, with gold reduction already taking initial shape. Moving forward, the pace of new store openings will be dynamically balanced with the expansion of our two-door service team to ensure the efficiency of both our physical locations and personnel.

So my second question is what are the plans and targets for the multi-category business in the future? Thank you.

In terms of the multi-category business, it has maintained a record development trajectory this year, benefiting from our quick improvements in several metrics, including service coverage, baseline pricing capabilities for various categories, and user experience. Our multi-category recycling business operates on an asset-light platform model, which is less susceptible to policy changes and emphasizes compliant operations. It focuses on core user experience metrics such as transaction efficiency and pricing within the C2B model. In the third quarter, against the backdrop of rapidly rising gold prices, we prioritized user transaction experience by reducing our take rate. This approach provided users with tangible value and benefits while also ensuring the rapid growth of our transaction volume. Looking ahead, leveraging the strength of our AHS Recycle brand and our store network, we will prioritize developing high-value categories that are convenient for users to bring to our store for transactions. We aim to integrate user demographic profiles, including age and gender, to solidify the consumer mindset of AHS Recycle's go-to destination positioning.

Thank you.

The next question will come from Michael Kim with Zacks Small Cap Research. Please go ahead. Mr. Kim, your line is open.

Hi. Can you hear me?

Yes. We can hear you.

Okay. Curious to get your perspective on the uptake of enhanced services across your marketplace businesses and how maybe a more favorable mix might impact take rates? And then just related to that, how has the mix trended more recently as it relates to multi-category transactions? Thanks.

The take rate for PJT Marketplace remained stable at over 6%. The slight variation in the platform take rate in the third quarter was primarily due to phased adjustments in our merchant service policy, where we allow buyers more flexible return exchange options. PJT actively introduced innovative transaction models such as the specialty buyer model and expanded platform supply chain connectivity to Douyin. This provides more influencers and small business owners with access to industry supply sources, simplifies secondhand transactions, and offers consumers better products and greater value. Within the Pipai Marketplace, the consignment model has shown initial success, driving its take rate into the high single-digit range to 9%. There remains room for optimization in both the sales categories and take rate structure for consignment. This standardized model effectively addresses operational challenges for small merchants by offering a simpler store setup experience, higher transaction efficiency, and better pricing and sales channels. As the consignment business scales, both the revenue structure and take rate of the Pipai Marketplace have the potential for further optimization. Our report volume comes from gold reflecting, which is more standardized and operates with a low single-digit take rate. The service take rate for the secondhand luxury category comes to exceed 10%. For future category expansion, we will prioritize high-value categories that offer greater service value and potential for higher take rates.

Got it. Thanks for taking my question.

As there are no further questions at this time, I would like to turn the conference back over to management for closing remarks.

Thank you. Thank you all again for joining us. A replay of today's call will be available on our IR website shortly, along with a transcript when ready. If you have any additional questions, please feel free to email us at ir@atrenew.com. Have a good day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.